20 December 2022 (Updated 31 August 2023)

What’s the issue?

Greenhouse gas (GHG) emissions disclosures are a key indicator of a company’s impact on the environment and its exposure to transition risk.

Although required in certain jurisdictions, GHG emissions reporting is largely voluntary at present.

Many companies use the GHG Protocol Standards1 as guidance on how to measure and report their GHG emissions, but some are required or choose to use other guidance – e.g. local regulatory requirements. Even within the GHG Protocol Standards, companies have flexibility in how they measure and report their emissions.

Additionally, companies typically report later than their financial statements and there is significant variety in the proportion of Scope 3 emissions they report – including which types of emissions are included, and whether measurement covers the full value chain.

The requirements to disclose Scope 1, 2 and 3 GHG emissions aim to drive relevant yet comparable disclosure for investors. Companies need to get ready to measure and report clear, consistent data.

What are the requirements?

The climate standard2 requires companies to disclose absolute Scope 1, 2 and 3 GHG emissions, calculated in line with the GHG Protocol Corporate Standard1.

Companies will calculate Scope 2 emissions using the location-based approach3, and provide information on any contractual instruments they have entered into – e.g. contracts to purchase renewable energy. Providing market-based Scope 2 emissions may form part of the disclosure to fulfil this requirement.

Separate reporting of Scope 1 and 2 emissions from the consolidated group (e.g. the parent and subsidiaries) and from unconsolidated investees (e.g. associates, joint ventures and unconsolidated subsidiaries) is required, to support users in connecting the disclosures to the financial statements.

Companies will disclose their Scope 3 emissions under the relevant categories in the GHG Protocol Value Chain Standard1, including information about the measurement approach, inputs and assumptions used. For further discussion about the reporting of Scope 3 emissions, including transition reliefs, see our article.

What’s the impact?

Companies will need to report Scope 1, 2 and 3 emissions disclosures at the same time as their financial statements. For many, it will be a challenge to collate quality data in time; the International Sustainability Standards Board (ISSB) has introduced reliefs to support companies.

By referring to the GHG Protocol Standards and providing some additional guidance, the ISSB aims to balance achieving comparability with providing relevant disclosure, while making the requirements achievable for all types of company. Some examples are shown below.


Actions for management

  • Read our guide for more on the GHG Protocol Standards’ measurement requirements and the climate standard.
  • Review your Scope 1, 2 and 3 emissions measurement approaches and determine if additional data is required.
  • Assess whether any existing systems, processes and controls are sufficient to support quality emissions reporting at the same time as your financial statements, subject to the transition relief set out in this article.
  • For companies that are also in the scope of the EU or US requirements, monitor whether these align with the ISSBTM requirements.

1 The Greenhouse Gas Protocol Corporate Accounting and Reporting Standard (2004) (the GHG Protocol Corporate Standard) provides guidance for companies preparing a GHG emissions inventory. The Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (2011) (the GHG Protocol Value Chain Standard) provides guidance on the categories of Scope 3 emissions. We refer to them together as the GHG Protocol Standards. The measurement of GHG emissions under the climate standard is determined with reference to the GHG Protocol Corporate Standard.

2 IFRS S2 Climate-related Disclosures.

3 A ‘location-based’ approach reflects the average emissions intensity of grids on which energy consumption occurs using mostly grid-average emissions factor data. As such, it is more closely tied to physical energy consumption without the source of that energy factoring into the calculation.

4 Intergovernmental Panel on Climate Change (IPCC).

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